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German growth forecast cut as Europe scrambles to contain price shock from Iran war
The institutes said energy costs from the Iran war will keep inflation at 2.8% and leave Germany's 2026 growth at 0.6%.
- On Wednesday, five leading German economic institutes slashed their 2026 growth forecast to 0.6% from 1.3% and lowered 2027 to 0.9% from 1.4%, citing energy price shocks from the Iran war.
- Surging oil and gas prices followed the late February start of the Iran war, which blocked the Strait of Hormuz and disrupted global transport routes critical to fuel supply.
- Inflation is now forecast to rise to 2.8%, "weighing on household purchasing power," with a 4.9% surge in energy prices driving the monthly acceleration across the eurozone.
- Economy Minister Katherina Reiche said the forecast increases pressure to "tackle structural reforms forcefully," while the institutes cautioned against fuel price cuts, arguing they distort market signals needed for recovery.
- Beyond immediate energy shocks, the institutes warned that demographic change and industrial decline threaten sustainable growth, recommending the government "improve conditions for investment and innovation" to navigate "multiple transformations.
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79 Articles
Due to the war in the Middle East, the most important economic researchers halve their prognosis to 0.6 percent this year. By the end of the decade, the growth potential is to come to a complete standstill
Leading economic institutes warned on Wednesday that an energy crisis caused by the war in the Middle East would hit the German economy hard and sharply cut their growth forecasts for Europe's largest economy.
The Iran war and the blockade of the Strait of Hormus hit the German economy with full force: experts strongly correct their growth forecast for 2026, while inflation goes through the ceiling.
Higher fuel prices, higher inflation: the people in Germany are experiencing the effects of the Iran war. Institutes expect only a mini-growth of the economy for this year.
Associated Press News
German growth forecast cut as Europe scrambles to contain price shock from Iran war
Experts have slashed their 2026 and 2027 growth forecasts for the German economy, Europe’s biggest, while governments across the continent are introducing measures to help soften the price impact of the Iran war.
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